wiiw study analyses economic support and reform agenda for Ukraine

In view of today’s EU-Ukraine summit, wiiw presents the most urgent recommendations to stabilise and reform the Ukrainian economy.

In the new wiiw study ´How to Stabilise the Economy of Ukraine´, undertaken on behalf of United Europe and Bertelsmann Stiftung, wiiw analyses the economic effects of the conflict, the country’s foreign trade relations, as well as possible ways how to stabilise the economy of Ukraine.

Under the crucial assumption that peace is restored, wiiw has drawn up policy recommendations for Ukraine, its European partner and the international community at large how to put Ukraine on the path to sustainable, long-term growth:

  • Forgive a large part of Ukraine’s external debt and allow the Ukrainian National Bank enough foreign exchange reserves to move to a more stable exchange rate regime.
  • Consider a delay of the full implementation of the DCFTA and hence temporarily shield the fragile domestic market from the EU import competition, while still maintaining free-market access to the EU and the CISFTA, as currently arranged.
  • Longer transition periods as regards approximation to the EU regulations should be negotiated in order to ensure orderly adjustment to a more competitive market environment.
  • Financial and material assistance should be rigidly tied to the progress on dismantling the oligarchic interests. This will require legal system reforms, the severance of relationships between business and politics, proper taxation of oligarchic assets and confiscation of illegally amassed wealth.
  • Apart from fostering EU integration, restore, as much as possible, trade relations with Russia and the Russian-led Eurasian Economic Union (EAEU) via trilateral negotiations.
  • Develop a long-term modernisation strategy including an industrial policy to improve competitiveness and restructure sectors such as machinery, railway, chemicals, food processing and nuclear industry.
  • Put together a coherent package to attract foreign direct investment by revitalising the FDI agency InvestUkraine and by setting up business and industrial parks with clear ownership rights, good infrastructure as well as the support of the competent local/regional administration. Encourage cross-border production linkages with Central European economies.
  • Last but not least, a sensitive approach towards the social impact of the stabilisation policies currently implemented in Ukraine as part of the IMF-led programme is needed. The impact of such policies on ordinary Ukrainian citizens should be carefully considered so as not to erode the necessary reform support.

The wiiw study ´How to Stabilise the Economy of Ukraine´is available for free download below.